What do rising diesel prices and falling gasoline prices mean?


By Alex Nelson Malanga

By Ephrahim Bahemu

Dar es Salaam. Fuel price changes have left people facing different challenges since the new plan took effect yesterday.

While gasoline and kerosene imported through the port of Dar es Salaam fell by 21 and 44 shillings per liter respectively, that of diesel increased by 13 shillings.

The changes increased a liter of petrol and diesel to Sh2,480 and Sh2,338 respectively in the commercial city while kerosene dropped to Sh2,291 per litre.

Tanzania consumes about 3.5 billion liters of petroleum products per year, with diesel accounting for about 60% of this.

In the 2019/20 financial year, for example, the country imported a total of 1.9 billion liters of diesel and some 1.303 billion liters of gasoline, according to data from the Utilities Regulatory Authority of energy and water (Ewura).

“These changes are due to changes in world market prices, transportation costs (“BPS premium”) and the value of shillings against the US dollar,” Ewura said in a statement on Tuesday.

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Local price changes are primarily attributed to changes in world oil market prices, Bulk Supply System (BPS) premiums, and the value of shillings against the US dollar

Oil prices hit seven-year highs in January, with the main international crude contract, Brent, rising above $90. Prices are now hovering below $90.

Major oil-producing nations, led by Saudi Arabia and Russia, yesterday announced a further modest increase in output despite soaring crude prices and geopolitical tensions rocking markets.

The 23-nation OPEC+ group said in a statement it would increase production by 400,000 barrels a day in March, the same amount as in previous months. The group, which includes the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia and their 10 allies including Russia, has resisted US pressure to further increase production to rein in prices. .

No blame for the instability

Last year, the Tanzanian government intervened with several measures to slow the rise in fuel prices.

Tanzania Truck Owners Association (Tatoa) spokesman Mr. Raheem Dosa said the government was not responsible for the price instability.

However, he was of the view that the government should step in and reduce taxes and charges so that fuel prices can come down further.

This, he said, would help reduce the operational costs incurred by traders.

He said that fuel accounts for 70% of the operational costs of transport activities.

“Rising fuel prices are having a negative effect on our business,” he said.

“And we cannot continue to shift the burden onto end consumers by increasing the price of our services every day.”

Apart from the increase in transport costs which could end up driving up the prices of products and services, the increase in the price of diesel could make it more expensive to operate machinery and generators as an alternative source of electricity.

This is something to be concerned about as the price increase came just days after the Tanzania Electric Supply Company Limited (Tanesco) announced a 10-day electricity rationing.

The Executive Director of the Tanzania Association of Petroleum Marketing Companies (Taomac), Mr. Raphael Mgaya, said the cost of the BPS premium could come down if large vessels are used to ship the product and thus offer a margin of maneuver to take advantage of economies of scale.

Again, there could be relief if the products were subsidized. Professor Delphin Rwegasira from the University of Dar es Salaam (Udsm) School of Economics recommended that the government take precautionary measures against the growing demand for fuel which could drive up prices. “There is a need for price regulation,” suggested the Udsm economics professor.

In November last year, the government said that Tanzanians should expect stable fuel prices from December of the same year as the government launched a new system for importing petroleum products.

Under the new system, the government has said it will now import products directly from refineries owned by countries that also produce crude oil.

This, Energy Minister January Makamba said, would reduce the role of intermediaries in the fuel marketing chain.

He said the Tanzania Petroleum Development Corporation (TPDC) would be responsible for importing fuel for use in the country.

This would be a change from the current system where fuel is imported by private companies through the BPS.

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